Self Employed

[RLymanC]

reported 2000 income and 5000 expenses in 2007. Came in with no income and 7000 expenses in 2008???

He is in consulting and runs around studying other manufactures methods and procedures in hopes of getting clients.

No EIC involved by reducing income. Saves on taxable income however.
Any thoughts on reporting, or not reporting losses on Sch C would be appreciated.

[AJsTax]

Intent

I would ask the client his intent and effort put forth to make this a business. If he is putting forth a fair amount of time and effort and putting himself out to the market as being available for hire with letters, advertising, contacts, etc. then he might have a good case for the loss. But he would have to prove intent to being in a trade or business. If he is just trying to learn the process and is not ready to sell his services I would hesitate to file the Sch C until he is actively working and selling the service.
Just my thoughts. Not every business make money the first year or two. But the amount of expense is not very high for serious intent to run a business.

[RLymanC]

Thanks AJ

Those were my thoughts also, I was a little hesitant on the no income part. He can indeed show all the requirements that you mentioned.